The insurer financial strength rating on Highmark Inc. (Highmark), which does business as Highmark BCBS and PA Blue Shield, is based on extremely strong capitalization, strong business profile, and strong earnings. Offsetting these positive factors are Highmark's limited growth opportunities in its primary operating regions. The rating also reflects uncertainties related to the termination of a joint operating agreement with Capital Blue Cross (CBC). This agreement, which ends on April 1, 2002, serves about 1.2 million members. Highmark's business profile, earnings, and capitalization could be adversely affected by the termination of the agreement. -- Extremely strong capitalization. Highmark has extremely strong capitalization, with a Standard&Poor's capital adequacy ratio of 232% at year-end 2000 and about $2.2 billion in
